Dec. 5 (BusinessDesk) - The New Zealand dollar
followed its Australian counterpart higher after the Reserve
Bank of Australia cut interest rates in line with
expectations and soothing fears the world's 12th biggest
economy could be in for a big fall as its mining boom peaks.

The kiwi increased to 82.43 US cents at 8am in Wellington
from 82.29 cents yesterday, following the Australian
dollar's lead, which rose to US$1.0472 from US$1.0446. The
kiwi was little changed at 78.68 Australian cents from 78.73
cents yesterday.

The RBA cut the target cash rate a
quarter point to 3 percent, the lowest level since the
depths of the global financial crisis and matching a
five-decade low. Governor Glenn Stevens said the bank has
started seeing signs of looser monetary policy emerge, and
was seen as a move to foster growth outside the resources
sector which has underpinned the economy in recent years.
Government figures today are expected to show the Australian
economy grew 0.6 percent in the September quarter.

"The
accompanying statement highlighted the negatives, but there
were no new negatives and markets are in the mood to take no
news as good news," said Kymberly Martin, strategist at Bank
of New Zealand in Wellington. "If the RBNZ comes out
(tomorrow) and points to the obvious things about the
economy and provides no new fears, we might have a similar
reaction."

The RBA's review comes two days before the
Reserve Bank of New Zealand reviews monetary policy, with
governor Graeme Wheeler tipped to keep the official cash
rate on hold at 2.5 percent. That would cut Australia's
interest rate advantage to half a percentage point.

BNZ's
Martin said the currency may trade between 82 US cents and
82.60 cents today.

Dairy prices at Fonterra Cooperative
Group's online auction fell 2 percent, with the exporters
increasing the supply available. The sale came a day after
ANZ New Zealand data showed New Zealand commodity prices
rose for a fifth month in November and after government
figures this week showed the country's terms of trade fell
to a three-year low in the September quarter as a strong
currency eroded returns on dairy exports.

Global investor
sentiment was flat as US policymakers continued to cling to
their partisan colours as they struggle to avert the US$607
billion fiscal cliff of spending cuts and tax increase. The
latest deal put forward by senior Republican and House of
Representatives Speaker John Boehner was shot down within an
hour by the White House, and highlighted fractures within
the Republican party.

New Zealand's trade-weighted index
was unchanged at 73.45, and the kiwi was little changed at
67.51 yen at 8am in Wellington from 67.57 yen yesterday. The
currency traded at 62.95 euro cents from 62.99 cents
yesterday, and increased to 51.20 British pence from 51.09
pence.

The Wellington-based BusinessDesk team led by former Bloomberg Asian top editor Jonathan Underhill and Qantas Award-winning journalist and commentator Pattrick Smellie provides a daily news feed for a serious business audience.

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